Imagelinx Announcements

Imagelinx PLC
27 September 2007
Imagelinx plc
("Imagelinx" or the "Company")
Unaudited Interim results for the six months ended 30 June 2007

Highlights
?Half year turnover up by £600,000 on the prior period
?Half-year loss of £706,000 is a £653,000 improvement on the same period
in 2006 (technical restatement of loss in 2006 as Imagelinx now bears all
group's overheads)
?All 4 recent new clients expected to increase revenue in a full year by
£1.5 million
?Annualised cost savings of more than £2 million - most already achieved
?Board expects further improvement in second half 2007
?New work practices improve workflows and focus on better customer service

In detail

The loss before tax for the group was reduced from £2.1m last year in the first
half, to £0.7m due to the sale of a loss making business in the second half of
last year, a lower level of exceptional operating expenses and better
performance from the continuing activities.

Turnover for the half year rose by some £600,000 due largely to the acquisition
of Tecnolink, which together with revenue from a new major client, more than
offset the loss of business last year and a lower level of spend by some clients
in the current year. This last feature was particularly noticeable in the first
quarter of this year.

Operating results before exceptionals produced a lower loss than last year at
£606,000 compared to last year's £800,000. Last year's Imagelinx loss before
exceptional items of £400,000 has been subject to a technical restatement at
£800,000 to reflect the fact that the Imagelinx division now bears all of the
group's overheads following the successful sale last year of the Mailaender
division.

The first half of 2007 has seen the full impact of the acquisition of Tecnolink,
which was acquired at the end of 2006. Tecnolink was profitable on revenue of
£1.4m with its profitability slightly ahead of last year, despite lower revenue.
Imagelinx's revenue was lower than the previous year due to the loss of a major
client (Duracell), in the first half of last year. In addition, both Imagelinx
and Tecnolink have seen a lower level of spend by some clients in the first half
of the year.

However, the cost cutting initiated at the end of last year has exceeded the
reduction in sales across the two businesses in the first six months of the year
and further benefits from these cost savings are expected to come through both
in the second half and in next year. Annualised cost savings across the whole
group are expected to be more than £2m, with most of this already achieved.

As a result of these measures and announced previously, the group returned to
EBITDA positive in the second quarter. The results were helped by the
contribution from our major new client, Danone and the second half will see
incremental benefits of rising sales from our three other new clients Pets at
Home, the Hills pet food division of Colgate and from our most recent award from
a major European pharmaceutical company. In total, these 4 clients should
account for extra revenue of some £1.5m in a full year.

In order to improve capacity and efficiency and maximise our gross margin, a
reorganisation of combined work practices has commenced and will be completed by
the end of the year. While this will not yield any further immediate savings it
will mean that both existing and new clients will be served better and we will
achieve better cost recovery as we take on extra business.

We continue to focus on attracting not only new clients but also other divisions
and business units of our existing clients and have recently completed a number
of major tenders. The award of business from the above new clients has confirmed
to the Board the strength of the company's services and of our unique IT based
solutions. These solve the difficulties faced by major global consumer goods
companies in controlling their packaging artwork processes and in obtaining
print and brand consistency across the globe.

Following the end of the first half, we announced that we had won two of the
major new clients mentioned above and we are now commencing work for these
clients. We have continued to take costs out of the operating businesses and
this will be completed before the end of the year. We have also since 30th June
received the final payment in respect of the disposal of the Mailaender division
of £0.3m, although it will be another 18 months before we can determine if the
contingent consideration of euro 3 million will be received.

The Board is confident of seeing further improvement in the second half of the
year.

CONSOLIDATED INCOME STATEMENT
(Unaudited) (Unaudited) (Unaudited)
Notes 30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000
CONTINUING OPERATIONS 2
Revenue 3,802 3,194 5,880
Cost of sales (2,028) (1,447) (2,812)
_____________ _____________ _____________
GROSS PROFIT 1,774 1,747 3,068

Other operating income - - -
Administration expenses (2,380) (2,546) (4,978)
Other operating expenses (100) (560) (2,643)
_____________ _____________ _____________
OPERATING RESULT (706) (1,359) (4,553)

Finance income - - 120
Finance costs (11) (28) (36)
_____________ _____________ _____________
LOSS BEFORE TAX (717) (1,387) (4,469)

Tax income/(expense) 12 - -
_____________ _____________ _____________
LOSS FROM CONTINUING
OPERATIONS AFTER TAX (705) (1,387) (4,469)

DISCONTINUED
OPERATIONS
(Loss)/profit from
discontinued operations - (697) 11,705

RESULT FOR THE YEAR (705) (2,084) 7,236
_____________ _____________ _____________
Loss per ordinary share 4
From continuing
operations
Basic and diluted (0.24p) (0.57p) (1.82p)
From continuing and
discontinued
operations
Basic (0.24p) (0.86p) 2.95p
Diluted (0.24p) (0.86p) 2.79p
_____________ _____________ _____________

CONSOLIDATED STATEMENT OF TOTAL RECOGNISED INCOME AND EXPENDITURE

(Unaudited) (Unaudited) (Unaudited)
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000

Actuarial losses on defined
benefit pension scheme - - (1,100)
Exchange differences on
translation of foreign
operations - 62 (32)
_____________ _____________ _____________
NET INCOME RECOGNISED DIRECTLY
TO EQUITY - 62 (1,132)
(Loss)/profit for the period (705) (2,084) 7,236
_____________ _____________ _____________
Total recognised income and
expense for the period (705) (2,022) 6,104
_____________ _____________ _____________
CONSOLIDATED BALANCE SHEET
(Unaudited) (Unaudited) (Unaudited)
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000
NON-CURRENT ASSETS
Goodwill 4,384 5,308 4,384
Other intangible assets 887 - 987
Property, plant and equipment 1,363 1,331 1,567
_________ _________ _________
6,634 6,639 6,938
CURRENT ASSETS
Inventories 81 17 61
Trade and other receivables 2,564 1,526 2,156
Cash and cash equivalents 283 218 1,479
_________ _________ _________
2,928 1,761 3,696
Assets held for sale - 16,218 -
_________ _________ _________
TOTAL ASSETS 9,562 24,618 10,634

CURRENT LIABILITIES
Trade and other payables (653) (708) (701)
Tax liabilities (235) (245) (211)
Obligations under finance leases (132) (125) (140)
Bank overdrafts and loans - (1,255) -
Short term provisions (643) (274) (809)
Loan notes (100) - -
_________ _________ _________
(1,763) (2,607) (1,861)
NON-CURRENT LIABILITIES
Retirement benefit obligations (5,084) (4,279) (5,174)
Obligations under finance leases (95) (125) (174)
Loan notes (100) - (200)
_________ _________ _________
(5,279) (4,404) (5,548)
Liabilities directly associated with
current and non-current assets
classified as held for sale - (24,891) -

TOTAL LIABILITiES (7,042) (31,902) (7,409)
_________ _________ _________
NET ASSETS 2,520 (7,284) 3,225
_________ _________ _________
EQUITY
Share capital 14,452 12,117 14,452
Share premium account 38,644 38,728 38,644
Translation reserve (32) 62 (32)
Profit and loss account (50,544) (58,191) (49,839)
_________ _________ _________
2,520 (7,284) 3,225
_________ _________ _________
CONSOLIDATED CASH FLOW STATEMENT

(Unaudited) (Unaudited) (Unaudited)
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000

NET CASH from operating activitieS (1,029) 202 (410)
_________ _________ _________
Investing activities
Interest received - 3 13
Purchases of property, plant and
equipment (69) (118) (95)
Expenditure on product development - (62) (62)
Acquisition of subsidiary - - (1,125)
Disposal of subsidiary, net of cash
disposed - - 2,679
_________ _________ _________
Net cash generated/(used) in
investing activities (69) (177) 1,410
_________ _________ _________
Financing activities
Interest paid (11) (243) (249)
Repayment of obligations under
finance leases (87) - (82)
New finance leases - 250 -
Repayment of loans - (1,024) (1,780)
Proceeds from bank borrowings - 1,500 -
Issue of ordinary shares - - 2,051
_________ _________ _________
Net cash generated/(used) from
financing activities (98) 483 (60)
_________ _________ _________
DECREASE/INCREASE in cash (1,196) 508 940
_________ _________ _________
1 FINANCIAL INFORMATION

This interim announcement was approved by the Board of Directors on 26th
September 2007.

The financial information set out in this interim report does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The Group's statutory financial statements for the year ended 31 December 2006,
prepared under UK GAAP, have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and did not
contain a statement under Section 237(2) of the Companies Act 1985.

The directors continually monitor the financial position of the Group, taking
into account the latest forecasts of future cash flows and analyses of these
forecasts, sensitised in respect of the key uncertainties facing the Group's
ability to generate cash. The directors consider that group's ability to
continue as a going concern is dependant on the timing of actual versus targeted
sales in Imagelinx while it is building up the client base for its services, and
the agreement with the Pensions Regulator of a schedule of payment with regard
to contributions required for the Crabtree of Gateshead pension fund. This
agreement is expected in the second half.

2 TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

These interim consolidated financial statements are for the half year ended 30
June 2007. They have been prepared in accordance with the requirements of IFRS 1
"First-time Adoption of International Financial Reporting Standards" relevant to
interim reports, because they are part of the period covered by the Group's
first IFRS financial statements for the year ended 31 December 2007. They do not
include all of the information required for full annual financial statements,
and should be read in conjunction with the consolidated financial statements of
the Group for the year ended 31 December 2006.

These financial statements have been prepared under the historical cost
convention.

These consolidated interim financial statements (the interim financial
statements) have been prepared in accordance with the accounting policies set
out below which are based on the recognition and measurement principles of IFRS
in issue as adopted by the European Union (EU) and are effective at 31 December
2007 or are expected to be adopted and effective at 31 December 2007, our first
annual reporting date at which we are required to use IFRS Accounting Standards
adopted by the EU.

Imagelinx plc's consolidated financial statements were prepared in accordance
with United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice) until 31 December 2006. The date of transition to IFRS was
1 January 2006. The comparative figures in respect of 2006 have been restated to
reflect changes in accounting policies as a result of adoption of IFRS. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS
are given in the reconciliation schedules, presented and explained in note 5.

The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these consolidated interim financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

First-time adoption

In preparing these financial statements, the group has elected to apply the
following transitional arrangements permitted by IFRS 1 'First-time Adoption of
International Financial Reporting Standards':

?Business combinations effected before 1 January 2006 have not been
restated.
?The carrying amount of capitalised goodwill at 1 January 2006 that arose
on business combinations accounted for using the acquisition method under UK
GAAP was frozen at this amount and tested for impairment at 1 January 2006.
The carrying amount was adjusted for intangible assets that would have been
required to be recognised in the acquiree's separate financial statements in
accordance with IAS 38 'Intangible Assets', such as development costs.
?Actuarial gains and losses of employee defined benefit plans have been
recognised in full at 1 January 2006.
?Only those exchange differences arising on the retranslation of foreign
operations since 1 January 2006 have been recognised as a separate component
of equity.
?IFRS 2 'Share-based payments' has been applied to employee options
granted after 7 November 2002, including those options vesting prior to
transition date.
?Except as noted above, the following principal accounting policies have
been applied consistently in the preparation of these financial statements:

Basis of consolidation

Where the company has the power, either directly or indirectly, to govern the
financial and operating policies of an entity or business so as to obtain
benefits from its activities, it is classified as a subsidiary. The consolidated
financial statements present the results of the company and its subsidiaries
("the group") as if they formed a single entity. Intercompany transactions and
balances between group companies are therefore eliminated in full.

Revenue

Revenue is measured by reference to the fair value of consideration received or
receivable by the group for goods supplied and services provided, excluding VAT
and trade discounts. Revenue is recognised upon the performance of services or
transfer of risk to the customer.

When the outcome of a transaction involving the rendering of services can be
estimated reliably, revenue associated with the transaction is recognised by
reference to the stage of completion of the transaction at the balance sheet
date. The outcome of the transaction is deemed to be able to be estimated
reliably when all of the following conditions are satisfied:

? The amount of revenue can be measured reliably
? It is probable that economic benefits associated with the transaction
will flow to the entity, and
? The costs incurred for the transaction and the costs to complete the
transaction can be measured reliably.

Due to the short lead-times of services provided, the recognition of revenue by
'stage of completion' is not appropriate for the Group.

Business combinations

The consolidated financial statements incorporate the results of business
combinations using the purchase method other than disclosed above (see
'first-time adoption'). In the consolidated balance sheet, the acquiree's
identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The results of acquired
operations are included in the consolidated income statement from the date on
which control is obtained.

Goodwill

Goodwill represents the excess of the cost of a business combination over the
interest in the fair value of identifiable assets, liabilities, and contingent
liabilities acquired. Cost comprises the fair value of the assets given,
liabilities assumed and equity instruments issued, plus any direct costs of
acquisition.

Goodwill is capitalized as an intangible asset with any impairment in carrying
value being charged to the income statement.

Where the fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess is credited
in full to the income statement.

Intangible assets

Externally acquired intangible assets are initially recognized at cost and
subsequently amortised on a straight-line basis over their useful economic
lives. The amortization expense is included within the administrative expenses
line in the income statement.

Intangible assets are recognized on business combinations if they are separable
from the acquired entity or give rise to other contractual/legal rights. The
amounts ascribed to such intangibles are arrived at using appropriate valuation
techniques.

The significant intangibles recognized by the group, their useful economic lives
and the methods used to determine the cost of intangibles acquired in the
business combination are as follows:

Intangible asset Useful Economic Valuation
life method
Non-contractual/contractual Customer 5 years Estimated discounted
Lists and relationships cash flow

Impairment

Other non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable amount
(ie the higher of value in use and fair value less costs to sell), the asset is
written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the asset's cash-generating unit
(ie the lowest group of assets in which the asset belongs for which there are
separately identifiable cash flows). Goodwill is allocated on initial
recognition to each of the group's cash-generating units that are expected to
benefit from the synergies of the combination giving rise to the goodwill.
Impairment charges are included in the administrative expenses line item in the
income statement, except to the extent they reverse gains previously recognised
in the statement of recognised income and expense.

Discontinued operations

A discontinued operation is a cash generating unit, or group of cash generating
units, that either has been disposed of, or is classified as held for sale, and:

?Represents a separate major line of business or geographical area of
operations
?Is part of a single co-ordinated plan to dispose of a separate major line
of business or geographical area of operations or
?Is a subsidiary acquired exclusively with a view to resell

The disclosures for discontinued operations in the prior year relate to all
operations that have been discontinued by the balance sheet date for the latest
period presented.

Property, Plant and equipment

Items of property, plant and equipment are included at cost, net of
depreciation. Depreciation is provided in equal annual instalments on the
original costs, other than freehold land, so as to write them down to their
residual value over their estimated useful lives. The estimated useful lives are
as follows:

Leasehold land and buildings - the lease term
Leasehold improvements - the lease term
Plant and machinery - three to ten years
Office equipment - four to ten years
Motor vehicles - four to five years
IT project costs - three years

The carrying value of property, plant and equipment is reviewed for impairment
if events or changes in circumstances indicate the carrying value may not be
recoverable.

Non-current assets classified as held for sale

Assets held for sale include assets that the group intends and expects to sell
within one year from the date of classification as held for sale. Assets
classified as held for sale are measured at the lower of their carrying amounts
immediately prior to their classification as held for sale and their fair value
less costs to sell. Assets classified as held for sale are not subject to
depreciation or amortisation.
Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of
ordinarily interchangeable items are assigned using average cost formula. Cost
includes materials and direct labour.

Financial assets

Financial assets are divided into the following categories: loans and
receivables and financial assets at fair value through profit or loss. Financial
assets are assigned to the different categories by management on initial
recognition, depending on the purpose for which they were acquired. The
designation of financial assets is re-evaluated at every reporting date at which
a choice of classification or accounting treatment is available.

All financial assets are recognised when the group becomes a party to the
contractual provisions of the instrument. Financial assets are recognised at
fair value plus transaction costs.

Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. Trade and other
receivables are classified as loans and receivables. Loans and receivables are
measured subsequent to initial recognition at amortised cost using the effective
interest method, less provision for impairment. Any change in their value
through impairment or reversal of impairment is recognised in the income
statement.

Provision against trade receivables is made when there is objective evidence
that the group will not be able to collect all amounts due to it in accordance
with the original terms of those receivables. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present
value of estimated future cash flows.

An assessment for impairment is undertaken at least at each balance sheet date.

Regular way purchases and sales are accounted for on trade date. A financial
asset is derecognised only where the contractual rights to the cash flows from
the asset expire or the financial asset is transferred and that transfer
qualifies for derecognition. A financial asset is transferred if the contractual
rights to receive the cash flows of the asset have been transferred or the group
retains the contractual rights to receive the cash flows of the asset but
assumes a contractual obligation to pay the cash flows to one or more
recipients. A financial asset that is transferred qualifies for derecognition if
the group transfers substantially all the risks and rewards of ownership of the
asset, or if the group neither retains nor transfers substantially all the risks
and rewards if ownership but does transfer control of that asset.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term highly liquid investments which are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and
are recognised when the group becomes a party to the contractual provisions of
the instrument. Financial liabilities are recorded initially at fair value, net
of direct issue costs.

Financial liabilities are recorded at amortised cost using the effective
interest method, with interest-related charges recognised as an expense in
finance cost in the income statement. Finance charges, including premiums
payable on settlement or redemption and direct issue costs, are charged to the
income statement on an accruals basis using the effective interest method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.

A financial liability is derecognised only when the obligation is extinguished,
that is, when the obligation is discharged or cancelled or expires.

Foreign currencies

The balance sheets of the overseas companies are translated at the rate of
exchange ruling at the balance sheet date. The income statements of the overseas
companies are translated at the average exchange rate for the period. The
exchange difference arising on the retranslation of opening net assets and the
difference between the average and closing rate profit and loss account is taken
directly to reserves. All other translation differences are taken to the income
statement.

Retirement benefits: defined contribution schemes

Contributions to defined contribution pension schemes are charged to the income
statement in the year to which they relate.

Retirement benefits: defined benefit schemes

Scheme assets are measured at fair values. Scheme liabilities are measured on an
actuarial basis using the projected unit method and are discounted at
appropriate high quality corporate bond rates that have terms to maturity
approximating to the terms of the related liability. Appropriate adjustments are
made for unrecognized actuarial gains or losses and past service costs. Past
service cost is recognized as an expense on a straight line basis over the
average period until the benefits become vested. To the extent that benefits are
already vested the group recognizes past service cost immediately.

Actuarial gains and losses are recognized immediately through the statement of
recognized income and expense. The net surplus or deficit is presented with
other net assets on the balance sheet. The related deferred tax is shown with
other deferred tax balances. A surplus is recognized only to the extent that it
is recoverable by the group.

Leased assets

Where substantially all of the risks and rewards incidental to ownership of a
leased asset have been transferred to the group (a "finance lease"), the asset
is treated as if it had been purchased outright. The amount initially recognised
as an asset is the lower of the fair value of the leased asset or the present
value of the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease payments are
analysed between capital and interest. The interest element is charged to the
income statement over the period of the lease and is calculated so that it
represents a constant proportion of the lease liability. The capital element
reduces the balance owed to the lessor.

Where substantially all of the risks and rewards incidental to ownership are
retained by the lessor (an "operating lease"), the total rentals payable under
the lease are charged to the income statement on a straight-line basis over the
lease term.

The land and buildings elements of property leases are considered separately for
the purposes of lease classification.

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of
an asset or liability in the balance sheet differs to its tax base, except for
differences arising on:

?the initial recognition of goodwill;
?the initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction affects
neither accounting or taxable profit; and
?investments in subsidiaries and jointly controlled entities where the
group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is
probable that taxable profit will be available against which the difference can
be utilised.

The amount of the asset or liability is determined using tax rates that have
been enacted or substantially enacted by the balance sheet date and are expected
to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax balances are not discounted.

Deferred tax assets and liabilities are offset when the group has a legally
enforceable right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax authority on
either:

?the same taxable group company; or
?different group entities which intend either to settle current tax assets
and liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered.
3 SEGMENT ANALYSIS

Imagelinx plc operates in only one division, that of packaging graphics
services, with all significant operations being based either in the UK, Germany
or the United States. The segmental analysis of operations is as follows:

Segmental analysis by activity (Unaudited) (Unaudited) (Unaudited)
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000

REVENUE BY ORIGIN
UK 2,969 2,318 4,253
Germany - - -
US 833 876 1,627
Discontinued operations - 18,985 18,990
_________ _________ _________
Total Revenue 3,802 22,179 24,870
_________ _________ _________

SEGMENT RESULT
UK (725) (1,665) (4,754)
Germany (216) (17) (27)
US 235 323 228
_________ _________ _________
Operating result (706) (1,359) (4,553)
Finance income - - 120
Finance costs (11) (28) (36)
_________ _________ _________
Loss before tax (717) (1,387) (4,469)
Loss for the period from
discontinued operations - (697) 11,705
_________ _________ _________
Loss/profit before tax (717) (2,084) 7,236
_________ _________ _________
4 LOSS PER ORDINARY SHARE

The calculation of the basis and diluted earnings per share is based on the
following data.
Earnings:

(Unaudited) (Unaudited) (Unaudited)
30 June 30 June 31 December
2007 2006 2006
£'000 £'000 £'000
--------- -------- --------
Loss for the year - continuing (705) (1,387) (4,469)
Loss for the year - discontinued - (697) 11,705
-------------------------- --------- -------- --------
Loss for the year - continuing and
discontinued (705) (2,084) 7,236
-------------------------- --------- -------- --------

Number of shares

30 June 2007 30 June 2006 31 December 2006
No. No. No.
---------- --------- ---------
Weighted average number of
ordinary shares for the
purposes of basic earnings
per share 289,038,635 242,339,438 245,565,210
Effect of dilutive potential
ordinary shares: Share
options 13,416,202 13,416,202 13,416,202
------------------------- ---------- --------- ---------
Weighted average number of
ordinary shares for the
purposes of diluted earnings
per share 302,454,837 255,755,640 258,981,412

In accordance with IAS 33 'Earnings per Share', diluted earnings per share is
taken as being equal to basic earnings per share, where the Group has recorded a
loss, as the effect of including share options is anti-dilutive.

5 EXPLANATION OF TRANSITION TO IFRS

As stated in the Basis of Preparation, these are the Group's first consolidated
interim financial statements for part of the period covered by the first IFRS
annual consolidated financial statements prepared in accordance with IFRS.

An explanation of how the transition from UK GAAP to IFRS has affected the
Group's financial position, financial performance and cash flows is set out
below.

Reconciliation of equity at 1 January 2006

UK GAAP Effect of IFRS
transition to ifrs
a
Goodwill 5,618 5,618
Other intangible assets 1,501 (1,501) -
Property, plant and equipment 1,889 (420) 1,469
Assets held for sale
9,008 (1,921) 7,087
CURRENT ASSETS
Inventories 6,346 (6,316) 30
Trade and other receivables 9,804 (7,731) 2,073
Cash and cash equivalents 947 (783) 164

Non-current assets classified
as held for sale - 16,751 16,751
_________ _________ _________
TOTAL ASSETS 26,105 - 26,105

CURRENT LIABILITIES
Trade and other payables (11,940) 12,069 129
Tax liabilities (737) (737)
Bank overdrafts and loans (434) (434)
Short term provisions (5,784) 5,493 (291)
Loans (6,974) 6,974
_________ _________ _________
NET CURRENT ASSETS 236 24,536 24,772

NON-CURRENT LIABILITIES
Retirement benefit obligations (5,503) 1,231 (4,272)
_________ _________ _________
(5,503) 1,231 (4,272)
Liabilities directly associated
with current and non-current
assets classified as held for - (25,767) 25,767
sale
_________ _________ _________
TOTAL LIABILITIES (31,372) - (31,372)
_________ _________ _________
NET ASSETS (5,267) - (5,267)

Reconciliation of equity at 30 June 2006

UK GAAP Effect of transition IFRS
to ifrs

a b c
Goodwill 5,308 5,308
Other intangible assets 1,305 (1,305) -
Property, plant and equipment 1,724 (393) 1,331
Assets held for sale
8,337 (1,698) 6,639
CURRENT ASSETS
Inventories 8,436 (8,419) 17
Trade and other receivables 6,670 (5,144) 1,526
Cash and cash equivalents 1,175 (957) 218

Non-current assets classified
as held for sale - 16,218 16,218
_________ _________ _________
TOTAL ASSETS 24,618 - 24,618

CURRENT LIABILITIES
Trade and other payables (11,465) 10,757 (708)
Tax liabilities (750) 505 (245)
Obligations under finance
leases (125) - (125)
Bank overdrafts and loans (154) - (154)
Short term provisions (6,375) 6,101 (274)
Loans (4,432) 3,331 (1,101)
_________ _________ _________
NET CURRENT ASSETS 1,317 20,694 22,011

NON-CURRENT LIABILITIES
Retirement benefit obligations (5,436) 1,157 (4,279)
Obligations under finance
leases (125) - (125)
Loan notes (3,040) 3,040 -
_________ _________ _________
(8,601) 4,197 (4,404)
Liabilities directly associated with
current and non-current assets
classified as held for sale (24,891) (24,891)
_________ _________ _________
TOTAL LIABILITIES (31,902) - (31,902)
_________ _________ _________
NET ASSETS (7,284) - (7,284)

Reconciliation of equity at 1 January 2007

UK GAAP Effect of IFRS
transition to
ifrs
a b
Goodwill 5,371 -987 4,384
Other intangible assets 987 987
Property, plant and equipment 1,567 1,567
Assets held for sale
6,938 - 6,938
CURRENT ASSETS
Inventories 61 61
Trade and other receivables 2,156 2,156
Cash and cash equivalents 1,479 1,479

Non-current assets classified as held -
for sale

TOTAL ASSETS 10,634 10,634

CURRENT LIABILITIES
Trade and other payables -701 -701
Tax liabilities -211 -211
Obligations under finance
leases -140 -140
Bank overdrafts and loans - 0
Short term provisions -809 -809
Loans - 0

NET CURRENT ASSETS -1,861 -1,861

NON-CURRENT LIABILITIES
Retirement benefit obligations -5,174 -5,174
Obligations under finance
leases -174 -174
Loan notes -200 -200

-5,548 -5,548
Liabilities directly associated with
current and non-current assets
classified as held for sale

TOTAL LIABILITiES -7,409 -7,409

NET ASSETS 3,225 3,225
Reconciliation of equity at 1 January 2007

UK GAAP Effect of IFRS
transition to
ifrs
a b
Goodwill 5,371 (987) 4,384
Other intangible assets - 987 987
Property, plant and equipment 1,567 1,567
Assets held for sale
6,938 - 6,938
CURRENT ASSETS
Inventories 61 61
Trade and other receivables 2,156 2,156
Cash and cash equivalents 1,479 1,479

Non-current assets classified as held -
for sale
_________ _________
TOTAL ASSETS 10,634 10,634

CURRENT LIABILITIES
Trade and other payables (701) (701)
Tax liabilities (211) (211)
Obligations under finance
leases (140) (140)
Bank overdrafts and loans - -
Short term provisions (809) (809)
Loans - -
_________ _________
NET CURRENT ASSETS (1,861) (1,861)

NON-CURRENT LIABILITIES
Retirement benefit obligations (5,174) (5,174)
Obligations under finance
leases (174) (174)
Loan notes (200) (200)
_________ _________
(5,548) (5,548)
_________ _________
TOTAL LIABILITIES (7,409) (7,409)
_________ _________
NET ASSETS 3,225 3,225

Reconciliation of profit for the year ended 30 June 2006

UK GAAP Note IFRS
c
CONTINUING OPERATIONS
Revenue 22,179 (18,985) 3,194
Cost of sales (15,831) 14,384 (1,447)
_________ _________ _________
GROSS PROFIT 6,348 (4,601) 1,747

Other operating income - -
Administration expenses (7,628) 5,082 (2,546)
Other operating expenses (560) - (560)
_________ _________ _________
OPERATING RESULT (1,840) 481 (1,359)

Finance income 3 (3) -
Finance costs (243) 215 (28)
_________ _________ _________
LOSS BEFORE TAX (2,080) 693 (1,387)

Tax income/(expense) (4) 4 -
_________ _________ _________
LOSS FROM CONTINUING OPERATIONS AFTER TAX (2,084) 697 (1,387)

DISCONTINUED OPERATIONS
Profit from discontinued operations - (697) (697)
_________ _________ _________
RESULT FOR THE YEAR (2,084) - (2,084)
Reconciliation of profit for the year ended 31 December 2006

UK GAAP Note IFRS
c
CONTINUING OPERATIONS
Revenue 24,870 (18,990) 5,880
Cost of sales (17,195) 14,383 (2,812)
_________ _________ _________
GROSS PROFIT 7,675 (4,607) 3,068

Other operating income 12,309 (12,309) -
Administration expenses (9,975) 4,991 (4,984)
Other operating expenses (2,643) - (2,643)
_________ _________ _________
OPERATING RESULT 7,366 (11,925) (4,559)

Finance income 133 (13) 120
Finance costs (257) 227 (30)
_________ _________ _________
LOSS BEFORE TAX 7,242 (11,711) (4,469)

Tax income/(expense) (6) 6 -
_________ _________ _________
LOSS FROM CONTINUING OPERATIONS AFTER TAX 7,236 (11,705) (4,469)

DISCONTINUED OPERATIONS
Profit from discontinued operations - 11,705 11,705
_________ _________ _________
RESULT FOR THE YEAR 7,236 - 7,236

NOTES TO THE RECONCILIATIONS

a) The Group acquired Tecnolink Limited on 13 December 2006. Application of
IFRS 3 to this business combination resulted in identification of a number of
intangible assets, including non contractual and contractual customer lists and
customer contracts. Under IFRS these have been recognised separately in the
balance sheet at their fair value at the date of the combination. Under UK GAAP
these intangible assets were subsumed within goodwill. The result of this
adjustment is to decrease goodwill and increase intangible assets by £987,000 at
the date of combination. At 31 December 2006 the value of intangible assets was
increased by £987,000. The value of goodwill at 31 December 2006 was reduced by
£987,000.

b) Goodwill recognised by the Group on acquisition of Imagelinx UK Ltd under
UK GAAP was amortised over a period of 15 years. Under IFRS goodwill is not
amortised, but tested annually for impairment. The goodwill amortisation charge
recognised in accordance with UK GAAP in 2006 was written back. However, the
impairment test performed at 31 December 2006 resulted in an impairment
writ-down of £1,700,000. Following the reversal of £620,000 amortisation under
IFRS, a further £620,000 impairment write-down is required for the year ended 31
December 2006. Therefore under IFRS, an impairment of £2,320,000 was made.
Following the reversal of £310,000 amortisation under IFRS, a further £310,000
impairment write-down is required for the period ended 30 June 2006.

c) The results of discontinued operations are disclosed in line item under
IFRS, where under UK GAAP each profit and loss heading was split between
continuing and discontinued.

Explanation of material adjustments to the cash flow statement

The definition of cash is narrower under UK GAAP than under IAS 7 "Cash Flow
Statements". Under IFRS highly liquid investments, readily convertible to a
known amount of cash and with an insignificant risk of changes in value, are
regarded as cash equivalents. The cash flow statement in the last UK GAAP
financial statements reported movements in cash. The cash flow statement in
these IFRS consolidated interim financial statements reports movements in cash
and cash equivalents.

Application of IFRS has resulted in reclassification of certain items in the
cash flow statement as follows:

i) under UK GAAP, payments to aquire property, plant and equipment were
classified as part of 'Capital expenditure and financial investment'.
Under IFRS, payments to acquire property, plant and equipment have
been classified as part of 'Investing activities'.

ii) income taxes of £6,000 paid during 2006 are classified as operating cash
flows under IFRS, but were included in a separate category of tax cash flows
under previous GAAP.

There are no other material differences between the cash flow statement
presented under IFRS and the cash flow statement presented under UK GAAP.

Enquiries
Imagelinx plc

Albert Klein, Executive Chairman
Tel: +44 7801 910920

Alistair Rae, Chief Executive
Tel: +44 7736 883934

Jonathan Haslam, Public relations
Tel: +44 0207 662 2644

Seymour Pierce

Jonathan Wright/Sarah Jacobs
Tel: +44 (0)207 107 8000


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